What lies ahead for Air India? National carrier seeks Rs 2,200 crore equity infusion: Report

THE future course of action for beleaguered national carrier Air India seems uncertain after the NDA Government has decided not to go ahead with its decision to sell a 76 per cent stake in national carrier Air India. This decision was taken at a high-level convened by Finance Minister Arun Jaitley on June 18. The meeting was attended by Civil Aviation Minister Suresh Prabhu, Interim Finance Minister Piyush Goyal, Transport Minister Nitin Gadkari and senior officials. One factor shaping up the decision is understood to be the impending General Elections slated earlier next year.
Also since the government had not received...
any bids for the airline, the process should not go ahead. Instead, cost-cutting measures should be adopted and efforts made to monetise assets to run the airline, sources said.
It is understood that funds would be made available to ensure that Air India’s operations are not affected. They pointed out that with the airline posting operating profits there was no need to push its divestment process. Instead operational efficiency should be improved.
The government’s second attempt to privatise Air India came a cropper when not a single bid was received till May 31, the last date for interested parties to submit an Expression of Interest (EoI)for the airline.
The government also tried to sweeten the deal by assuring potential bidders that the airline’s debt would be parked in a special purpose vehicle, and that the government would only have the rights of minority shareholders in India.
Meanwhile, post the failure of the divestment process, RSS-affiliate the Swadeshi Jagran Manch (SJM) has been pitching for an Initial Public Offering for the airline while Anand Mahindra has called for appointing a government official “with the potential and passion” of E Sreedharan (former Managing Director, Delhi Metro Rail Corporation) as the Chairman and Chief Executive Officer of the airline.Air India has sought immediate restoration of Rs 2,200-crore equity infusion from the government to meet its operational requirements as the process to sell the debtladen airline has now been put on the back burner.
Once this decision is formally adopted by the group of ministers led by FM Arun Jaitley, AI will be asked to consider its fleet requirements and see how many planes it needs to take on lease to ensure its market share does not get eroded further as private Indian carriers have collectively ordered almost 1,000 planes. Renting planes, instead of buying them, does not need government nod.
Meanwhile, some reports indicate that certain players are still in touch with the government, saying they would be interested in acquiring the airline if the terms of sale are changed. "There is a precedent for that. Terms of Pawan Hans divestment and handing over management of Ahmedabad and Jaipur to private players were changed after the first attempt to do so drew a blank. People interested in AI also expect the same. AI is losing Rs 15 crore a day and this figure will rise as oil prices go north. Deferring AI sale will mean a huge hole of close to Rs 6,000 crore in the exchequer's pocket in a year," said a person close to the failed transaction.